THE founder and three employees of the Megaupload file-sharing website have appeared in court in New Zealand after being arrested in police raids.
New Zealand police also seized guns, artwork, more than £5 million in cash and luxury cars valued at nearly £3 million after serving 10 search warrants at several businesses and homes around the city of Auckland.
The Megaupload site was shut down yesterday over US accusations that it facilitated millions of illegal downloads of films, music and other content, costing copyright holders at least £300 million in lost revenue.
With 150 million registered users, about 50 million hits daily and endorsements from music superstars, Megaupload.com was among the world's biggest file-sharing sites.
Big enough, according to a US indictment, that it earned founder Kim Dotcom £27 million last year alone.
The company is based in Hong Kong and Dotcom was living in New Zealand, but some of the alleged pirated content was hosted on leased servers in Virginia, and that was enough for US prosecutors to act.
Today, the four defendants stood together in an Auckland courtroom in the first stage of extradition proceedings that could last a year or more.
Dotcom's lawyer raised objections to a media request to take photographs and video, but then Dotcom spoke out from the dock saying he did not mind photos or video "because we have nothing to hide".
The judge granted the media access, and ruled that the four would remain in custody until a second hearing on Monday.
Dotcom, Megaupload's former chief executive and current chief innovation officer, is a resident of Hong Kong and New Zealand and a dual citizen of Finland and Germany who had his name changed legally. The 37-year-old was previously known as Kim Schmitz and Kim Tim Jim Vestor.
The other defendants are two German citizens and one Dutch citizen, and three other defendants - another German, a Slovakian and an Estonian - remain at large.
The Electronic Frontier Foundation, which defends free speech and digital rights online, said in a statement that the arrests set "a terrifying precedent. If the United States can seize a Dutch citizen in New Zealand over a copyright claim, what is next?".
The indictment was unsealed one day after websites including Wikipedia and Craigslist shut down in protest against two congressional proposals intended to make it easier for authorities to go after sites with pirated material, especially those with overseas headquarters and servers.
Before Megaupload was taken down, the company posted a statement saying allegations that it facilitated massive breaches of copyright laws were "grotesquely overblown".
"The fact is that the vast majority of Mega's internet traffic is legitimate, and we are here to stay. If the content industry would like to take advantage of our popularity, we are happy to enter into a dialogue. We have some good ideas. Please get in touch," the statement said.
Several sister sites were also shut down, including one dedicated to sharing pornography files.
The seized £5 million in cash had been invested in various New Zealand financial institutions, and has been placed in a trust pending the outcome of the cases.
Police spokesman Grant Ogilvie said the seized cars include a Rolls-Royce Phantom Drophead Coupe worth £260,000. Two short-barrelled shotguns and a number of valuable artworks were also confiscated.
According to the indictment, Megaupload was estimated at one point to be the 13th most frequently visited website on the internet. Current estimates by companies that monitor web traffic place it in the top 100.
Megaupload is considered a "cyberlocker", in which users can upload and transfer files that are too large to send by email.
Such sites can have legitimate uses. But the Motion Picture Association of America, which has campaigned for a crackdown on piracy, estimated that the vast majority of content being shared on Megaupload was in violation of copyright laws.
The website allowed users to download some content for free, but made money by charging subscriptions to people who wanted access to faster download speeds or extra content. The website also sold advertising.
Megaupload was unique, not only because of its massive size and the volume of downloaded content, but also because it had high-profile support from celebrities, musicians and other content producers who are most often the victims of copyright infringement and piracy.
Before the website was taken down, it contained endorsements from Kim Kardashian, Alicia Keys and Kanye West, among others.
The company listed Swizz Beatz, a musician who married Keys in 2010, as its chief executive. He was not named in the indictment and declined to comment.
The five-count indictment, which alleges copyright infringement as well as conspiracy to commit money-laundering and racketeering, described a site designed specifically to reward users who uploaded pirated content for sharing, and turned a blind eye to requests from copyright holders to remove copyright-protected files.
For instance, users received cash bonuses if they uploaded content popular enough to generate massive numbers of downloads, according to the indictment. Such content was almost always copyright-protected, the indictment said.
The US justice department said it was illegal for anyone to download pirated content, but its investigation focused on the leaders of the company, not end-users who may have downloaded a few movies for personal viewing.
News of the shutdown seemed to bring retaliation from hackers who claimed credit for attacking the US justice department's website. American officials confirmed the site was down for hours yesterday evening and the disruption was being "treated as a malicious act".
The site appeared to be working again late last night.
New Zealand police also seized guns, artwork, more than £5 million in cash and luxury cars valued at nearly £3 million after serving 10 search warrants at several businesses and homes around the city of Auckland.
The Megaupload site was shut down yesterday over US accusations that it facilitated millions of illegal downloads of films, music and other content, costing copyright holders at least £300 million in lost revenue.
With 150 million registered users, about 50 million hits daily and endorsements from music superstars, Megaupload.com was among the world's biggest file-sharing sites.
Big enough, according to a US indictment, that it earned founder Kim Dotcom £27 million last year alone.
The company is based in Hong Kong and Dotcom was living in New Zealand, but some of the alleged pirated content was hosted on leased servers in Virginia, and that was enough for US prosecutors to act.
Today, the four defendants stood together in an Auckland courtroom in the first stage of extradition proceedings that could last a year or more.
Dotcom's lawyer raised objections to a media request to take photographs and video, but then Dotcom spoke out from the dock saying he did not mind photos or video "because we have nothing to hide".
The judge granted the media access, and ruled that the four would remain in custody until a second hearing on Monday.
Dotcom, Megaupload's former chief executive and current chief innovation officer, is a resident of Hong Kong and New Zealand and a dual citizen of Finland and Germany who had his name changed legally. The 37-year-old was previously known as Kim Schmitz and Kim Tim Jim Vestor.
The other defendants are two German citizens and one Dutch citizen, and three other defendants - another German, a Slovakian and an Estonian - remain at large.
The Electronic Frontier Foundation, which defends free speech and digital rights online, said in a statement that the arrests set "a terrifying precedent. If the United States can seize a Dutch citizen in New Zealand over a copyright claim, what is next?".
The indictment was unsealed one day after websites including Wikipedia and Craigslist shut down in protest against two congressional proposals intended to make it easier for authorities to go after sites with pirated material, especially those with overseas headquarters and servers.
Before Megaupload was taken down, the company posted a statement saying allegations that it facilitated massive breaches of copyright laws were "grotesquely overblown".
"The fact is that the vast majority of Mega's internet traffic is legitimate, and we are here to stay. If the content industry would like to take advantage of our popularity, we are happy to enter into a dialogue. We have some good ideas. Please get in touch," the statement said.
Several sister sites were also shut down, including one dedicated to sharing pornography files.
The seized £5 million in cash had been invested in various New Zealand financial institutions, and has been placed in a trust pending the outcome of the cases.
Police spokesman Grant Ogilvie said the seized cars include a Rolls-Royce Phantom Drophead Coupe worth £260,000. Two short-barrelled shotguns and a number of valuable artworks were also confiscated.
According to the indictment, Megaupload was estimated at one point to be the 13th most frequently visited website on the internet. Current estimates by companies that monitor web traffic place it in the top 100.
Megaupload is considered a "cyberlocker", in which users can upload and transfer files that are too large to send by email.
Such sites can have legitimate uses. But the Motion Picture Association of America, which has campaigned for a crackdown on piracy, estimated that the vast majority of content being shared on Megaupload was in violation of copyright laws.
The website allowed users to download some content for free, but made money by charging subscriptions to people who wanted access to faster download speeds or extra content. The website also sold advertising.
Megaupload was unique, not only because of its massive size and the volume of downloaded content, but also because it had high-profile support from celebrities, musicians and other content producers who are most often the victims of copyright infringement and piracy.
Before the website was taken down, it contained endorsements from Kim Kardashian, Alicia Keys and Kanye West, among others.
The company listed Swizz Beatz, a musician who married Keys in 2010, as its chief executive. He was not named in the indictment and declined to comment.
The five-count indictment, which alleges copyright infringement as well as conspiracy to commit money-laundering and racketeering, described a site designed specifically to reward users who uploaded pirated content for sharing, and turned a blind eye to requests from copyright holders to remove copyright-protected files.
For instance, users received cash bonuses if they uploaded content popular enough to generate massive numbers of downloads, according to the indictment. Such content was almost always copyright-protected, the indictment said.
The US justice department said it was illegal for anyone to download pirated content, but its investigation focused on the leaders of the company, not end-users who may have downloaded a few movies for personal viewing.
News of the shutdown seemed to bring retaliation from hackers who claimed credit for attacking the US justice department's website. American officials confirmed the site was down for hours yesterday evening and the disruption was being "treated as a malicious act".
The site appeared to be working again late last night.
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